Suppose a policy intervention is correlated not just with level differences among units but is also correlated with trend differences. Which of the following analysis would be the most appropriate?
A)Fixed effects
B)First-differenced
C)Heterogenous trend
D)Random effects.

Question

Quizplus · Accepted Answer

When a policy intervention is correlated with both level and trend differences among units, a heterogeneous trend analysis is most appropriate. This approach allows for the estimation of effects when there are different trends over time across units, capturing both the level and trend variations that a policy might influence. Fixed effects, first-differenced, and random effects models typically do not account for varying trends across units in the same way.

Suppose a Policy Intervention Is Correlated Not Just with Level